Saturday, 10 March 2018

Overselling is one of the common business practices that is prominent in many industries like travel industry, telecommunications industry, hospitality industry, IT industry etc. The technique of overselling is practiced for getting the maximum return on investment. The path of overselling is laid on the expectation that the customers will not take complete advantage of the resources available to them and they might cancel their services or bookings. The company sells more than the readily available resources and this ensures that the gap created in between the average use of the resources and the maximum allocation limit is filled. In some industries overselling is regulated and in case the customers are denied a service that they were expecting from the company, the company is liable to give compensation to the customers.

This is a grey area of businesses that is used for maximizing ROI. The practice of overselling also prevails in the web hosting industry and it has almost the same effects as that of the other industries.

What is web hosting overselling?

Overselling can be done for any web hosting type like shared hosting, reseller hosting, VPS hosting etc. Let’s consider the instance of shared hosting. In shared hosting many websites are hosted on one physical server and all the resources are pooled and distributed between the users of the same server. Even though every user is allocated a maximum limit of resources, the web hosting providers monitor the server usage on a regular basis and they know that all users are not utilizing the maximum available resources.

In reality, complete server resources are barely utilized by the users and if in case the server is under-allocated, the hosting provider will continue to add users to the server. In this case, the hosting provider is selling the resources that it no longer has, this is overselling.

Web hosting overselling has become more prominent with unlimited web hosting packages. In an unlimited web hosting package, the web hosting provider does not define the exact amount of resources that wall be allocated to each client. Even though the hosting package is promoted to be unlimited, this might not be the reality. Having said that, there are hosting providers that offer genuine unlimited web hosting packages as well. Therefore, it is important to read the terms of service (TOS) of the web hosting company before signing up for any unlimited web hosting package.

The web hosting providers that practice overselling rely on the thought that users are not very wise. If the user’s website is up and running, the load times seem to be ok and there are no downtimes or outages, then the user will continue to be happy with the service. If overselling is done to the extreme, it can have harmful effects on the quality of service provided. Hosting more and more users on a single server (crowding the users) until the server can no longer bear the load will result in a catastrophic situation and there will be many angry customers who will no longer trust the hosting provider.

While overselling is a way through which the hosting companies try to get more return out of their investment, it is a risky move and can cause long term damage to the name and trustworthiness of the hosting company.

Why do web hosting companies oversell?

Even though the web hosting industry is highly lucrative, it is highly competitive as well. If we analyze web hosting overselling though a pure business perspective, we can relate to it as it is the last resort that can fetch a high ROI. But when you look at it from an ethical point of view, the practice of overselling is risky and not fare.

Web hosting companies have to recover the costs that are incurred for advertising and promotions, affiliate programs etc. and one way to do this without increasing the costs of the services provided is to squeeze the server resources as much as possible. From the affordability point of view, even though a web hosting provider is overselling, it is not that the customer is losing out on anything. Not all the web hosting companies that practice overselling are bad, but if overselling is not managed and stopped at the right time, things can get out of control and there are possibilities of servers getting failed and services getting degraded.